Celsius Holdings Inc at UBS Global Consumer and Retail Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Peter Grom - UBS - Analyst : <_ALACRA_META_ABSTRACT>Look, I kind of wanted to start maybe just looking back and maybe just John, I think it would be helpful to just kind of get your perspective on kind of what's happened over the last year. And look, you energy drinks weren't alone in this, but I think if we were sitting on this stage last year, I think many of us weren't really anticipating like this big slowdown. So as time has gone by, I'm sure you have a better perspective in terms of what's actually happening. So can you maybe just understand why you think the category slowed the way it did last year? John Fieldly - Celsius Holdings Inc - Chairman of the Board, President, Chief Executive Officer Yes. I mean, thanks for having us. And I think when you said -- if we were sitting here last year, we were all in a really good position, looking at March, the year was off to a great start for the whole category and Celsius. And we are gaining some of the largest distribution gains we've seen in company history. And there was -- you saw this kind of wave into Q2, and then we started to see some category slowdown for the first time. So the category went negative for the first time in the third quarter, saw some macroeconomic challenges. We saw convenience store traffic slow. There is some shifting in consumer purchasing habits, frequencies. And we felt we were impacted by that. We were -- we got up. I think it was the end of Q1 to beginning of Q2, we had the highest share that we've ever REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 1:00PM, CELH.OQ - Celsius Holdings Inc at UBS Global Consumer and Retail Conference received, almost a 12% share in the energy category, now roughly around 11%, if you exclude coffees and teas out of the energy category. We've been hovering right around that number, but off the highs. And we woke up the two largest players in the category. We woke them up and believe in sugar free, launched a ton of innovation, some of the largest innovation coming from the competition that we've ever seen. The good news is the category for the first time shifted to greater sales coming from sugar free, so that sugar free movement that Celsius has been talking about, and we are the clear -- our whole portfolio is sugar-free. We continue to see those trends in the healthy wellness trends. And we had some -- our innovation came in the beginning of the year. We had some lighter innovation in the back half of the year. And so that impacted some of our numbers, and we've seen that impacted in the first quarter as well. We have some timing of innovation and timing of promotional advertising programs within some of the top retailers that are recycling from the first quarter. So that's -- if you look at the scan data, we're a little bit soft in the last 12 weeks and four-week REITs, but we do expect that to continue to improve in opportunities as we're leading into the summer beverage season. So I think those are some of the trends that we're seeing. We're confident in the Celsius portfolio. We made it into -- in 2024, we made it into the top 10 of all trademarks in beverage. Celsius is ranked as the number nine beverage brand. In all of beverage, it's $2.7 billion retail sales, 22% growth in retail sales in 2024. So there's a lot of great tailwinds, a lot of momentum. We've got a lot of great innovation coming, and we're excited what 2025 is going to offer. And to us as we continue to build this base. And then we have additional -- the Ilani transaction, we're working. We're on closing that, and that's going to open up tons of opportunities for us as well. But the Celsius portfolio, we're super bullish on, and we think we're well positioned.

Question: Peter Grom - UBS - Analyst : Okay. Maybe picking up on that. I mean one of the things that we've seen from a category perspective, exiting '24 and '25 has kind of been this nice improvement just in terms of trends. So kind of curious, what do you think has kind of driven that improvement? Obviously, one of your largest competitors took a price increase, so that helps. But I'll be curious how volumes also improved as well, right? So I'll be curious what's really driving that. And I guess maybe a question for both of you, look, you're going to start to cycle that weaker summer, right, low single-digit growth. So would you anticipate category growth continuing to accelerate from here? Or is this kind of mid- to high single-digit range kind of a fair run rate as you think about 2025?

Question: Peter Grom - UBS - Analyst : No, that makes a ton of sense. I mean -- and then as you think about that moving forward, and you kind of alluded to this a little bit, right, just in terms of timing of innovation (technical difficulty) portfolio as we move through the summer here. And then I guess you kind (technical difficulty) call a couple of weeks ago, but you mentioned that you expected to gain. I think it was 15% to 20% more shelf space during the spring resets. Can you maybe just elaborate on that in a bit more detail? Is that broad-based (technical REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 1:00PM, CELH.OQ - Celsius Holdings Inc at UBS Global Consumer and Retail Conference difficulty) channels? And then (technical difficulty) I just -- the velocity numbers and the kind of the core brand have been a bit more challenged. So are you seeing any retailers pull back on shelf space in any locations?

Question: Peter Grom - UBS - Analyst : Shelf rate?

Question: Peter Grom - UBS - Analyst : Okay. So just maybe following up on that. So the 15% to 20% more, that's coming despite kind of more of the recent trends. Is that fair?

Question: Peter Grom - UBS - Analyst : Okay. Maybe just sticking with the distribution question, but just focusing on C stores. I know the channel has been more challenged, broadly speaking, I guess, but it's very important to their category and kind of similar to the broader market share discussion shares are also kind of ticking a bit lower here sequentially off the peak last year. But what's interesting, there's a gap between kind of your total company share and kind of C store a lower market share. So how are you thinking about closing the gap now, particularly as you expand TDPs in that channel?

Question: Peter Grom - UBS - Analyst : No, that's super helpful. I think that's a really good point, Jerry.

Question: Peter Grom - UBS - Analyst : Maybe I have a bigger picture question. And John, I would just love some perspective on your core consumer and maybe just compare and contrasting kind of the consumer preferences for functional beverages today versus maybe the Legacy energy drink category. And I guess maybe just describe the Celsius consumer in relation to Legacy energy drink category and how they fit within kind of broader LRP. And I guess what I'm really trying to understand is what's unique about the Celsius is consumer in terms of -- occasions frequency, brand loyalty and brand switching, right? And I guess is today's consumer really a different audience. And I guess is that alter the consistency of growth I guess it has the consumer more discretionary in any way versus maybe what is thought of traditional energy or legacy energy is more kind of daily use occasions.

Question: Peter Grom - UBS - Analyst : Yes, it makes sense. Maybe shifting to kind of Pepsi. A big part of the company's success has been kind of the distribution partnership there. Can you maybe just discuss how you're working to strengthen that relationship last year, you had some changes in the incentive structure. There were some unexpected inventory dynamics. So just any thoughts on the high level on the partnership. And then maybe, Jarrod, any color on kind of the inventory optimization going forward, anything that we need to kind of be aware of?

Question: Peter Grom - UBS - Analyst : Great. Jarrod, maybe sticking with you for a second here and kind of building on that. I would just love some perspective on just how we should be thinking about the US top line growth from a core Celsius perspective. Obviously, category growth, demand market share, all those will play a role. But you are lapping a pretty outsized impact as it relates to inventory destocking impact from promotional allowances, et cetera, but that also kind of follows a year in '23 where it seems like there was a little bit of an inventory build. So it's been harder for us, my peers, I think someone in the room how to figure out how much of this inventory promotional impact will normalize as we think about the year ahead. So I know you don't give guidance, but maybe you can sensually talk through how we should be thinking about lapping these impacts?

Question: Peter Grom - UBS - Analyst : That's really helpful. And then maybe rounding out kind of the -- or sorry, two last questions, just kind of the core portfolio. I mean, you touched on the shelf space opportunity, but can you just talk about what's planned from an innovation perspective? You launched the hydration sticks a short while ago. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 1:00PM, CELH.OQ - Celsius Holdings Inc at UBS Global Consumer and Retail Conference Can you just talk about the opportunity there? And I think this is your first real move outside of kind of the core energy drink category. But do you see opportunities for the Celsius brand to kind of expand into other adjacent categories as well?

Question: Peter Grom - UBS - Analyst : Okay. That makes sense. And then so maybe rounding out here can you just talk about the brand's opportunity to kind of expand internationally? You moved into several new markets this year. What have you learned about the brand in those markets? And as you think about growth from here, is it more about new markets? Or do you see an opportunity to expand distribution within those new markets that you went into over the last year?

Question: Peter Grom - UBS - Analyst : Okay. No. So we're only a few minutes left here. So I want to talk about Alani Nu. So maybe, John, just a broader question, just give us some high-level thoughts on the brand and maybe how it's positioned in the energy category?

Question: Peter Grom - UBS - Analyst : Given that both brands are kind of rooted in that health and wellness, I mean, is there a bit of a brand overlap in our core consumer?

Question: Peter Grom - UBS - Analyst : That's helpful. Jarrod, maybe one over to you. Can you just talk on the potential integration, how you plan to bring these two brands together and kind of maybe where you see the biggest opportunity for synergies looking ahead?

Question: Peter Grom - UBS - Analyst : Okay. Maybe sticking with you for a second, Jarrod, and shifting and talking about profitability for a second. It was kind of one of the bright spots here as we exited the year. Gross margin, north of 50%, similar position for the full year. Can you just talk about how you see gross margin and profitability more broadly evolving from here as you look out over the next 12 months? Obviously, aluminum and mid premium have been pretty topical across all beverages. But curious how you see those cost buckets kind of impacting your trajectory just based on where things stand today. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 12, 2025 / 1:00PM, CELH.OQ - Celsius Holdings Inc at UBS Global Consumer and Retail Conference

Question: Peter Grom - UBS - Analyst : Okay. And maybe just one final one here, just sticking with margins, but on more of the selling and marketing side, right? I mean it was 26% in '24. I know a component of that wasn't really just stepped up investment part of it was the deleverage that you saw. So just as we think about '25, Jarrod, what do you think is kind of a reasonable target?

Question: Peter Grom - UBS - Analyst : All right. Well, why don't -- that's a perfect place to stop, I think. John and Jerry, thank you so much for joining us today. We wish you nothing but the best of luck going forward.